To what extent are networks the units and the agents of economic restructuring in East Central Europe? Our presentation of each of the country cases (Germany, Hungary, and the Czech Republic) begins with a brief description of some important starting conditions, in particular the initial strength and cohesiveness of social networks in the economy and the initial orientations of policy makers in the government. From these starting points, we chart changes in the course of economic restructuring according to whether and how policy makers (and other economic actors) acknowledge the network properties of assets and of liabilities. We will see how institutional innovations, some of which resemble the configurations of deliberative association we discussed in the previous chapter, are facilitated or hindered by the particular ways in which policy makers in each case manage (or fail to manage) the interdependencies of assets and the chains of debt in the postsocialist setting.

GERMANY

Economic restructuring in the lands of the former GDR, or the new Länder, as they are now referred to in Germany, begins in a context in which a transplanted state administration and weak networks interact with strong markets. Among our three cases, interfirm networks were weakest in the old GDR. Unlike Hungary, where partial reforms had opened opportunities for firms to cultivate a range of supply links and engage in subcontracting with private and semiprivate subcontractors, the large Kombinate of East German industry were extraordinarily autarchic, and where they did rely on an outside supplier, the source was strictly designated by the planning authorities. Unlike Czechoslovakia, where managers had enough autonomy to capture mesolevel industrial associations (and even restore these after they were abolished from above), the German Kombinate were entirely the creatures of a centralized administrative apparatus.

It was with a similarly centralized administrative apparatus that Germany set out to reorganize the East German economy: The gigantic state holding, the Treuhandanstalt, was single-handedly responsible for the rapid conversion of some 12,000 formerly state-run companies into private enterprises modeled on West German corporate law. Headquartered in Berlin, the agency assembled a staff of 4,000, consisting of retrained East German clerical and professional staff augmented by itinerant West Germans with previous experience in management, consultancy, or finance.